The Hindu Business Line : The retailing revolution

The mass retailing boom that has been happening in the rest of India for the past three years or so seems set to hit Kerala too in a big way. Major corporate groups such as Reliance, Pantaloon Retail (India) and the RPG Group have all announced plans to expand their operations in the State. Going by the huge crowds that are swarming into hypermarkets such as Pantaloon’s Big Bazaar, Kerala’s consumers seem to be savouring the new retailing experience. But not ev eryone is happy.

Last week, a meet of “nationalists” and traders was held at Kasargod to pressure the Government to enact a law to protect small-scale traders and prevent the entry of multinationals in the retailing sector. Such opposition is not new to India’s retailing revolution.

MOM-AND-POP STORES

Politicians, mainly from the Left, have joined hands with small shop owners and have taken to the streets to defend the livelihoods of more than 12 million mom-and-pop stores around the country.

Small-scale retailing is said to be the source of livelihood for around 20 million urban workers and 12 million rural vendors. The size of the retail market in India is estimated between $320-350 billion, growing at 30-35 per cent. Organised retail trade makes up about 4 per cent of the total retail trade in India. India has about 13 million retail outlets providing direct and indirect employment to nearly 18 million people.

In an interview to the Fibre2fashion portal, Kishore Biyani, Managing Director of Pantaloon Retail (India) Ltd, which runs the hypermarket discount store format under the Big Bazaar brand; the food and grocery retail format under the Food Bazaar brand, and apparel stores under Fashion Station, said: “The company has stores in nearly 30 cities across the country, constituting over 2.7 million square feet of retail space. The company has also signed close to 10 million sq. ft. of retail space to be operational by end 2008, which represents 20-30 % of all modern retail space coming up in the next three years. Over 200 million footfalls are expected in our stores by 2006-07. In India, organised retail constitutes about 3% of total retail and is poised to reach 15-20% in the next few years, which translates into a 40 per cent compound annual growth rate.”

ATTRACTIVE DESTINATION

In its annual study of retail attractiveness among 30 emerging markets conducted by A.T. Kearney, a management consulting firm, India tops the list of 30 most attractive countries for mass merchant and food retailers looking to expand overseas. India’s retail market is vastly underserved and has grown by 10 per cent on an average over the past five years. The Kearney study adds that it is also one of the most fragmented retail markets in the world – the combined market share of the top five retailers totals less than two per cent. What drove India to such an attractive slot are the current moves to ease curbs on direct foreign ownership of retail outlets.

Thus global retailers such as Wal-Mart, Carrefour, Tesco and Casino, and others such as Marks & Spencer and the Benetton Group will all surely enter the Indian market. And Kerala being one of the most consumerist States in India, many of them will surely find a way here as well. Also, the special social geography of Kerala – characterised by a lack of sharp demarcation of the rural-urban divide, and the existence of pockets of opulence in remote regions, fuelled by non-resident remittances – makes the State particularly amenable to the retailing revolution.

As Pantaloon’s Biyani realised, “When we ventured into cities and towns like Sangli, Durgapur and Nasik, we were surprised to see the rising consumerism there, which made me believe that retail is not just an urban phenomenon.”

True, there will be some losers in the retail game, but these are unlikely to be the mom-and-pop stores. A study from Mexico found that Mexican Wal-Marts and affiliated stores are predominantly targeted to consumers from the middle and upper classes, unlike in the United States where the target market is lower-income consumers. Much of Mexico’s culture has revolved around the small mom-and-pop shops.

A difference between these shops and the larger retailers is that the family-owned businesses typically allow purchases on credit, so shopping there may be a necessity for liquidity-constrained shoppers who cannot obtain credit elsewhere, the study found.

As an avidly consumer-oriented State, Kerala cannot but open its arms to the big names in the retail business. The market may well be large enough to accommodate both the large and smaller players.

The writer can be contacted at kgkumar@gmail.com

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